Freddie and Fannie – Improving?
Healthcare Bill of Big Giants
Fannie Mae and Freddie Mac are two mortgage giants who have been sick for a while. The government took over some of the costs required for their treatment with a bailout loan of $200 billion each. On Christmas, the Obama administration said that this just wasn’t enough by deciding that Freddie and Fannie needed more, and gave them an unlimited line of credit over the next 3 years. So happy were the administration, that they even allowed Freddie and Fannie to take wage raises of $6 million each based on performances – performances that were non-existent and based on future assumptions. Will the Obama administration say the same about the millions of Americans who are borrowing money to finance a decent meal? Will these people get a line of credit with the same terms as the two giants?
It is indeed ironic that the announcement for the wage increases and unlimited line of credit for the next 3 years should come at a time when the country was looking to spend some time with their families over the holidays. It can even be assumed that this was a Christmas gift to the two giants for not performing. What should be pointed out is that the announcement came at a time when the critics were too busy with holiday preparations. Repercussions for the announcements will soon follow after the holidays are over, but that may be too late for the public to worry about. The damage has been done and any impending retributions will only be swept under the carpet from here on out.
Unnecessary Wage Increases
Even as reports about the losses these mortgage giants faced were published, it was disclosed that they spent over $42 million in executive wages. This was justified by saying that those who received this much money deserved it, but the average person who has lost his job and is facing a foreclosure will not understand their justification, or even excuses from the government. The Kenneth Fienberg commission was appointed to investigate the wages that executives took from the companies who received federal assistance from the government. Banks and financial institutions that had received assistance from the government, but didn’t want to adhere to the commission’s recommendations, simply got out by repaying the money back. That was not the case with Fannie Mae and Freddie Mac, as they got their cake and are having it too.
The future is unpredictable, as Fannie Mae’s debts are reported to exceed $200 billion and increasing at last count, which can also be assumed for Freddie Mac. The government will have done a good job if they manage a turnaround of these giants. If not, there will be another period of uncertainty, and the backlash that will follow will be disastrous, affecting all people. More and more people will be looking to borrow money in the aftermath of the backlash, while one hopes that these two get out of the ICU soon.
(Photo Credit: http://www.flickr.com/photos/wwworks/ / CC BY 2.0)